If the price rises from 3 to 4 per gallon, U.S. purchases of gasoline fall only about 5 percent Calculate the price elasticity of demand for gasoline. Does this measurement indicate that the demand for gasoline is elastic, unit elastic, or inelastic? How does the rise in the price of gasoline change total revenue from gasoline? The price elasticity of demand for gasoline is square >>> Answer to 2 decimal places

To calculate the price elasticity of demand for gasoline, we can use the following formula:<br /><br />Price Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)<br /><br />Given information:<br />- The price of gasoline rises from $3 to $4 per gallon.<br />- U.S. purchases of gasoline fall only about 5 percent.<br /><br />Step 1: Calculate the percentage change in quantity demanded.<br />Percentage Change in Quantity Demanded = -5% (since the quantity demanded falls)<br /><br />Step 2: Calculate the percentage change in price.<br />Percentage Change in Price = ($4 - $3) / $3 * 100% = 33.33%<br /><br />Step 3: Calculate the price elasticity of demand.<br />Price Elasticity of Demand = (-5%) / (33.33%) = -0.15<br /><br />The price elasticity of demand for gasoline is -0.15.<br /><br />This measurement indicates that the demand for gasoline is inelastic, as the absolute value of the price elasticity of demand is less than 1.<br /><br />To determine how the rise in the price of gasoline changes total revenue from gasoline, we can use the following relationship:<br /><br />Total Revenue = Price * Quantity Demanded<br /><br />Since the demand for gasoline is inelastic, the percentage change in quantity demanded is less than the percentage change in price. Therefore, the total revenue from gasoline will increase when the price rises.<br /><br />In summary:<br />- The price elasticity of demand for gasoline is -0.15.<br />- The demand for gasoline is inelastic.<br />- The rise in the price of gasoline will increase total revenue from gasoline.